Fevertree Drinks (AIM:FEVR) Plc will on Wednesday announce full-year results where the reopening of restaurants and bars in the past year are expected to have provided the perfect tonic to drive second-half growth.
The carbonated drinks maker was able to supplement lost income from hospitality’s closure with a surge in supermarket purchases of spirits and complementary mixers, but the relaxation following the rollout of vaccines should have brought the company back to its potential.
Profits of £61mln are expected by markets following a January trading update indicating double-digit growth across most of its markets, including 33% increase in revenue in the expanding US market.
But as restrictions lift, a more insidious obstacle is imminent in the face of rising inflation and slowing growth.
Fevertree will have to contend with increased logistics costs as oil prices hit 14-year highs, adding to a likely inevitable price rise at a time when inflation is expected to top 8% in the UK and US.
The resilience of discretionary spending will be tested, and accordingly, Fevertree’s sales as households make tougher decisions on consumption.
But to date, alcohol inflation has tended to largely undercut wider inflation, with alcohol and tobacco RPI at 0.8% in January compared with overall RPI of 7.8%. Nevertheless, cost increases for Fevertree will be hard for owners to ignore.
“The US remains a key are for expansion, but logistical challenges have proven a bugbear so far. New bottling partnerships in the US are key for easing some of the pain points. It’s expected that a second site will ramp up production in the first half and so there should be an update in this area,” said Matt Britzman, equity analyst at Hargreaves Lansdown.